640 F.2d 210 (9th Cir. 1981), 79-4117, Commercial Union Ins. Co. v. Ford Motor Co.

Docket Nº:79-4117.
Citation:640 F.2d 210
Party Name:COMMERCIAL UNION INSURANCE COMPANY, Appellant, v. FORD MOTOR COMPANY et al., Appellees.
Case Date:February 17, 1981
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 210

640 F.2d 210 (9th Cir. 1981)

COMMERCIAL UNION INSURANCE COMPANY, Appellant,

v.

FORD MOTOR COMPANY et al., Appellees.

No. 79-4117.

United States Court of Appeals, Ninth Circuit

February 17, 1981

Argued and Submitted Dec. 10, 1980.

As Modified on Denial of Rehearing and Rehearing En Banc

April 24, 1981.

Page 211

Robert A. Seligson, San Francisco, Cal., for appellant.

George W. Bullen (argued); Joseph J. DeHope, Jr., Bullen, McKone, McKinley, Gay & Keitges, Sacramento, Cal., on brief, for appellees.

Appeal from the United States District Court for the Northern District of California.

Before GOLDBERG, [*] FERGUSON and BOOCHEVER, Circuit Judges.

FERGUSON, Circuit Judge:

John Meyers sued Ford Motor Company and Haberfelde Ford, Inc., a Ford dealership, for damages. He alleged that he sustained injuries proximately resulting from defendants' negligence in the manufacture, sale and service of his car. 1 He also asserted that both defendants breached implied warranties of safety. Immediately prior to trial, Meyers dismissed Ford as a defendant believing that he stood a better chance for recovery if Ford's expert witnesses did not testify and that there was

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scant likelihood of recovery against Ford. Meyers won and Haberfelde's insurer, Commercial Union Insurance Co., paid $2,875,000 in settlement of the $3,250,000 judgment.

Commercial Union then instituted the instant diversity suit against Ford for equitable indemnification. Ford defended on the basis of Cal.Code of Civ.Proc. § 877, which states:

Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort

(a) It shall not discharge any other such tortfeasor from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater; and

(b) It shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors.

Ford claims its dismissal by Meyers was in good faith and that, as a dismissed party under § 877, it is not liable to Commercial Union for indemnification. Commercial Union counters that the dismissal was not a good faith settlement but rather a calculated tactical maneuver to which § 877 does not apply. The district court found in favor of Ford.

Reviewing the record, we find error in the district court's conclusion that a good faith settlement had taken place between Ford and Meyers. The court applied an erroneous test in making its decision. Accordingly, the judgment is reversed.

I.

Section 877 of the California Code of Civil Procedure prevents parties from seeking contribution from settling defendants. It does not refer to indemnification, the related remedial doctrine sought in this case by Commercial Union. 2 Recognizing that allowance of liberal indemnification would undercut the...

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